Washington: Employees at Moody’s Investors Service said that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or “sold our soul to the devil for revenue", according to emails obtained by US House investigators.

The emails were among several documents made public on Wednesday at a hearing of the House Oversight and Government Reform Committee in Washington, which is reviewing the role played by Moody’s, Standard and Poor’s (S&P’s) and Fitch Ratings Inc. in the global credit freeze.

“The story of the credit rating agencies is a story of colossal failure," committee chairman Henry Waxman, a California Democrat, said at the hearing. “The result is that our entire financial system is now at risk."

Moody’s and S&P in recent months had to downgrade thousands of mortgage-backed securities—many of which were originally given top AAA ratings—as delinquencies on the underlying loans soared well beyond the companies’ estimates and home values fell faster than they had expected. The downgrades contributed to the collapse of Bear Stearns Companies Inc. and Lehman Brothers Holdings Inc., and compelled the US government to set up a system to buy $700 billion (Rs34.86 trillion) of distressed assets from financial companies.

The Securities and Exchange Commission in a July report found the credit-rating firms improperly managed conflicts of interest and violated internal procedures in granting top rankings to mortgage bonds.

An email that an S&P employee wrote to a co-worker in 2006—obtained by committee investigators—said, “Let’s hope we are all wealthy and retired by the time this house of cards falters."

Former executives from S&P and Moody’s told lawmakers on Wednesday that credit raters relied on outdated models in a “race to the bottom" to maximize profits.

Jerome Fons, a former managing director of credit policy at New York-based Moody’s, told lawmakers that originators of structured securities “typically chose the agency with the lowest standards, engendering a race to the bottom in terms of rating quality".

The top executives of the credit-rating companies said in testimony that they were unprepared for the sharp drop in home prices and that their systems failed.